AVMA LIFE Educational Resources

4 Ways to Become Wealthier

Posted on 3/6/2018 by AVMA LIFE in veterinary medicine financial health wealth
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Welcome back to AVMA LIFE Trust's five-part financial health series! If you missed our first post on how to heal an ailing credit score, you can catch up here. Otherwise, keep reading, because this time we're curing an affliction that has sent countless affluent individuals spiraling into bankruptcy—the failure to live below your means.

First, let's establish why this is even worth discussing. After all, shouldn't you be fine as long as you're not outspending your income? Can't you achieve long-term financial success by just living within your means instead of below them?

The short answer is no.

It's very easy to be blinded by the sharp increase in income most veterinarians experience when entering the workforce. After living in relative modesty throughout long years of school and internships, the temptation to immediately upgrade every aspect of your life can seem downright irresistible. But just because your profession has a high earning potential doesn't mean you're immune to the perils of mismanaged funds.

In fact, a 2015 study conducted by SunTrust revealed that almost a third of Americans who make $75,000 or more are still living paycheck-to-paycheck.1 The message is clear: financial success hinges on your mindset far more than your money.

Living below your means is foundational in cultivating long-term prosperity. Here are four tips that can put you on the right path.

Tip 1: Continue (or begin!) to shop smart

It's easy to view increased income as an invitation to spend extra money on upscale versions of the products you've already been buying for years—which is exactly the trap companies want you to fall into.

In fact, Business Insider recently conducted an experiment: they sent someone to purchase 34 grocery items at Aldi, and then compared the cost of those same 34 products when bought at a nearby Walmart (the only difference being the branding).

Their findings were eye opening: the Aldi's total was almost 30% cheaper than Walmart's final tally.4 To put this in perspective, imagine a Walmart shopper's grocery costs coming in at $200 per month, or $2,400 per year. Over the course of the next decade, that shopper could save $7,200 just by switching to cheaper alternatives of the same food.

Of course, not everybody is going to prefer the off-brand item in every single instance, but you won't know until you try. A great shopping habit to implement is always try the generic version once—if you don't notice a discernable difference in quality, permanently replace the more expensive option with the cheaper alternative. Small savings like this, over time, add up to huge monetary gains.

Tip 2: Change how you think about budgeting

The idea of preparing and maintaining a monthly budget can seem daunting. Your life is already busy—how are you supposed to throw another task onto the pile?

Like many other endeavors in life, it all comes down to priorities. Here's a helpful mental exercise: Did you drop out of veterinary school because your life was too busy to handle the workload? No—you managed your time accordingly, because having a successful career was important to you.

It's not a stretch to say a successful career is at least partially measured by the ability to grow your finances. With that perspective in mind, it becomes much easier to connect the dots and realize that creating a budget can be just as vital to your career's success now as studying for an important exam was back in your school days.

There are plenty of different methods to choose from, including effective techniques like the Zero-Sum Budget or the Envelope System, but even just sitting down with a pen and paper or a tablet and your most recent bank statement is enough to get started.

We're also fortunate enough to live in an era with free digital applications that can streamline and automate complicated aspects of the budgeting process, saving plenty of time and headaches along the way. If you're interested in that type of service, mint.com is one of the most popular places to start.

Tip 3: Treat supplemental income like it doesn't exist

It's tempting to see bank account boosts as free money that can immediately be spent on impulse or luxury buys. Marketers often try to take advantage of this mindset, too—keep your eyes peeled for the tax refund sales some retailers run in April.

But remember—you've already been making daily ends meet without this extra income at your disposal. So when that tax return comes or your employer gives you a bonus, put it into your savings account or retirement plan right away. Even raises should partially adopt this model—if, for example, you receive a 4% raise, you should try to only increase your annual expenses by 2%. This allows room for lifestyle expansion without sacrificing bank account growth in the process.

Tip 4: Realize it will change your life for the better

The discipline needed to implement the previous ideas all comes down to one thing: your mindset. Casually thinking that money-saving techniques would be a nice thing to implement someday won't be enough, because the first obstacle your brain will try to hang you up on is the false belief that a high quality of life requires high levels of spending.

We all want to live comfortably, and most of us won't want to downsize our lifestyle in the name of some future payoff. But according to the American Psychological Association (APA), finances have accounted for the highest amount of stress in the lives of those they survey every year since 2007—the year APA's stress survey began.5

Since consistent stress carries a full arsenal of critical health consequences,6 one of the best ways to improve your quality of life isn't to spend more, it's to save more. Working toward removing financial stress from your life altogether will yield invaluable gains for your physical and mental health;7 the best way to get there for most people is by living below your means to build an impenetrable safety net of finances.

These four strategies can be implemented by anyone, regardless of income or debt. Voluntarily restricting your spending may be difficult at first, but the benefits of building long-term fiscal stability are worth more than anything with a price tag.

Our next financial health post will focus on smart retirement strategies—be sure to check it out!

CITATIONS

1Vincent, Suzanne, and Angela Amberg. "Many Higher Income Households Living Paycheck-to-paycheck." SunTrust. 16 April 2015. Web. 7 April 2016.

2"Generic Drugs: Answers to Common Questions." WebMD. Ed. Lisa Bernstein. 5 June 2015. Web. 7 April 2016.

3Leonardi, Lauren. "Do Cheap Pet Meds Do the Trick? Generic vs. Brand Names: How Generics Stack Up Against Name Brand Pet Meds." PetCareRx. 30 October 2017. Web. 27 December 2017.

4Peterson, Hayley. "There's a Shockingly Cheaper Alternative to Walmart." Business Insider. 4 December 2015. Web. 7 April 2016.

5"American Psychological Association Survey Shows Money Stress Weighing on Americans’ Health Nationwide." American Psychological Association. Harris Poll, 4 February 2015. Web. 7 April 2016.

6"Stress Effects on the Body." American Psychological Association. Web. 7 April 2016.

7Bressert, Steve, Ph.D. "The Impact of Stress." Psych Central. 2015. Web. 7 April 2016.

The purpose of this article is to provide information, rather than advice or opinion. It is accurate to the best of the author’s knowledge as of the publication date. Accordingly, this article should not be viewed as a substitute for the guidance and recommendations of a retained professional. Any references to external websites are provided solely for convenience. AVMA LIFE Trust disclaims any responsibility with respect to such websites.

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